Since the recession hit in 2008, the sector of real estate to show arguably the most improvement has been multifamily. Atlanta has seen an enormous amount of action in this area; to date, we have over 6,000 units under construction and another 6,000+ units proposed. Some have speculated throughout the process that Atlanta was getting a little ahead of itself when it came to construction of multi-family units, but high same-store rent growth figures in 2012 (7%) as well as high leasing velocity numbers gave developers the confidence boost they needed to carry on with construction.
As we head into 2014, most in the multi-family sector agree that everyone is going to feel more pressure from the apartment boom. While both leasing velocity and rent growth numbers are well above expectations, we are seeing these numbers start to slow in growth. Construction costs are continuing to rise and rent growth numbers are expected to be around 4.5% in 2014 (nearly 40% less than two years prior).
Atlanta might have lost sight of the fact that like everything else, apartment units are a commodity. And just like every other commodity, there will be oversupply. Greg Mutz, CEO of AMLI Residential Partners, says that oversupply is “inevitable” and will lead to rent figures and rent growth softening. Mutz followed that by indicating that even if rent growth slowed to 3.5%, most apartment developers would still be inclined to cover underwriting.Share